Wednesday 10 September 2003 03.33 EDT
First published on Wednesday 10 September 2003 03.33 EDT

Crucial global trade talks open in the luxury holiday resort of Cancun today with 146 countries squaring up for a bruising five days of negotiations amid little expectation that much headway will be made to bridge yawning gaps between rich and poor.

With security at an almost paranoid level - a third Mexican warship anchored off the Caribbean beach yesterday - the two big power blocks, the EU and the US, were playing their negotiating cards close to their chest.

But there was a new militancy among developing countries, led by China, Brazil and India, which are determined not to be bulldozed in the horse-trading.

Last night the town was brought to a halt by a march of about 1,000 peasant farmers, indigenous peoples and students who were stopped at the entrance of the luxury hotel zone by thousands of police. No arrests or violence were reported.

Whereas previous trade rounds have been stitched up by the EU, the US and Japan, poor countries have roundly rejected a last-minute deal on agriculture from Washington and Brussels as inadequate.

Instead a coalition of developing countries, representing 60% of the world's farmers, has tabled its own far more ambitious proposal, which would substantially cut western farm subsidies - currently worth six times more than all global aid spending.

An alliance of charities and developing world groups yesterday demanded that these subsidies should be reduced and that further liberalisation of the world economy should be stopped.

"The failure of developed countries to honour their commitments to a development round calls into question the credibility of the WTO," a spokesman for ActionAid said.

The trade secretary, Patricia Hewitt, arrives later this week to lead the British negotiating team, but the environment secretary, Margaret Beckett, already here, was optimistic yesterday. "There are a lot of delicate and difficult negotiations ahead," she said. "Most people do not want these talks to fail. That would be disastrous for the international economy."

Nevertheless, delegates have been at each others' throats in the weeks leading up to the meeting, on everything from farm subsidies to intellectual property rights.

A largely symbolic deal on cheap drugs for the developing world is all there is to show for two years of haggling since the new round of talks was launched in Doha, Qatar, in November 2001.

There developing world countries were promised that if they agreed to participate in the new round, the west would phase out export subsidies which experts blame for the mountains of cheap food dumped each year in poor countries, bankrupting local farmers.

The EU and the US also promised to open their markets to poor country agricultural exports and to trim the most trade-distorting subsidies which keep their inefficient farmers in business.

Two years after Doha it is clear that the EU would prefer cosmetic to radical surgery. Having botched the reform of its common agricultural policy, Brussels has taken to denouncing developing countries for demanding what was promised at Doha.

Washington blew its credentials as the champion of farm reform when the Bush administration signed a farm bill giving US farmers an extra $80bn (£50bn) in subsidies over the next 10 years.

Trade experts say that without a deal on agriculture the negotiations could stall in Cancun, making it even less likely that they will end on schedule by January 1 2005.

"There are two requirements for a successful outcome," said Kevin Watkins of Oxfam.

"First, industrialised countries need to agree a clear - and short - timeframe for eliminating export subsidies. Second, they need to cut the production subsidies that generate surpluses and facilitate export dumping."

The most contentious area is the EU's demand for global foreign investment and competition rules. Developing countries fear this could prevent them imposing stringent regulations on foreign multinationals.

Led by India, half the WTO's developing-country mem bers have signalled that they are unhappy about the talks.

Investment is the issue most likely to cause a bust-up in the EU caucus. Britain, once the most fervent supporter, is back-pedalling furiously. If Pascal Lamy, Europe's senior negotiator, insists on forcing the issue, he could face a rebellion in his own caucus room.